When Magic Isn't Magic - It's Better
Magic tricks are tricks. Compounding seems too good to be true, but it isn't.
Many people enjoy a good magic trick, knowing that it isn’t truly magic. As an example, take a look at the cards below and choose one of the cards. Remember your card,
We rearranged the cards below. Find your card.
We’ll do this one more time. We’ve shuffled the cards again. Find your card.
Amazingly, the card you freely chose has disappeared.
Magic? Not quite. You know it’s a trick and may have immediately figured out the sleight of hand we employed.
If not, scroll back up and see if you can figure it out.
If not, don’t worry.
Here’s the trick: none of the cards in the final image are in the first two images; we just assume the remaining cards are the same because they are similar.
How Does This Relate to Investing?
Many things you see about investing seem too good to be true, and that’s often a red flag.
The unbelievable way money can grow definitely seems too good to be true, but it isn’t. And that may be one reason investors don’t pay enough attention to it.
As it turns out, Compounding is the most important concept that people need to understand.
It’s actually the Secret to Investing.
If you’re a regular reader of these posts, you’ll know that we frequently cover Compounding.
It’s not really magic, it just seems that way.
Taking full advantage of Compounding can result in significantly higher future portfolio values.
Best regards,
Stuart & Sharon